NBN loses key man

NBN Co’s head of construction, Patrick Flannigan, quit just days after a multibillion-dollar tender ­collapsed amidst concerns by NBN about price gouging and mismanagement.

Mr Flannigan’s sudden departure from the senior management team was disappointing, the company in charge of rolling out the national broadband network said in a statement.

Three days ago NBN Co suspended a $10 billion to $14 billion tender to build much of the broadband network. It accused all 14 shortlisted construction firms of providing unnacceptable terms and overly high prices.

Mr Flannigan was generally re­garded by the industry as an excellent operator who worked with contractors rolling out the NBN.

He was not responsible for closing the controversial tender or making the accusations and The Australian Financial Review understands he was not pushed from the job.

Mr Flannigan will be temporarily replaced by the general manager of construction, design and planning, Dan Flemming, but neither was available for comment yesterday.

City Index analyst Peter Esho said Mr Flannigan’s departure would cost the NBN time and money.

“You can’t just replace someone at that level quickly and it will be expensive," he said. “He wouldn’t have just walked away over a small issue and what his departure indicates is that other NBN projects will soon start feeling similar cost pressures."

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The construction industry has reacted badly to accusations of price gouging and accused NBN Co of ­failing to understand issues that affected the pricing of the bids.

A spokesperson for one of the final 14 bidders who declined to be named said the industry was “amazed, bemused and confused".

“We bid on very modest margins," he said. “We are just furious and ­whoever has priced this bid clearly does not understand the dynamics of supply and demand in this market."

Ovum research director David Kennedy said the price gouging claim would be accurate only if all the companies participating were colluding.

“That doesn’t seem very probable to me," he said. “In such a competitive field, you would assume the bids were priced competitively, so there’s clearly a fundamental difference on the cost of key items such as labour."

The rejected tender included bids from Transfield, Downer EDI, John Holland and Telstra.

Over 18 months and four rounds of pricing negotiations the short list was whittled down from 45 suppliers to 14 and then finally to four.